Large-cap stocks are trendy investment choices. These are shares from companies with a market capitalisation of more than Rs 20,000 crore. Large companies are financially stable and can handle economic crises better. But before investors buy these shares, they must grasp large-cap meaning, features, and drawbacks. This article covers
- • What are large-cap stocks?
- • Features of large-cap stocks
- • Reasons to invest
- • Who should invest
- • Advantages and drawbacks
What are large-cap stocks?
Companies are divided by their market capitalisation size as large-cap, mid-cap, and small-cap. Large-caps are companies with a market capitalisation of Rs 20,000 crore and more. These are stocks of well-established companies that have a dominant market share. Market capitalisation estimates a company’s total worth by multiplying the share price with the total number of outstanding market shares. SEBI has identified 100 large-cap businesses based on their market capitalisation, which are listed on the stock exchanges from 1 to 100. Many large-cap stocks pay regular dividends and are suitable for investors looking for passive income.
Features of large-cap stocks:
Standard features of large-cap stocks are as follows.
These companies are well-established and financially stable with an extensive supply chain network. They remain consistent during economic cycles.
Large-cap firms have robust balance sheets and publish their financial details periodically. Investors can assess these reports to analyse investment decisions.
Large-cap companies are in the business for a longer time. Investors have more data available on their actions and financial activities.
Preferred by asset managers:
Mutual funds prefer to invest in large-cap stocks to balance risk exposure and improve returns. These stocks have higher liquidity and trade regularly on the bourses.
Many investors prefer large-cap stocks because their values increase with time. These companies pay regular dividends, creating passive income for investors.
Compared to mid-cap or small-cap stocks, large-cap stocks are costly because they are more discoverable and enjoy higher demands.
How to evaluate large-cap stocks:
The large-cap company category consists of various businesses, some of which have made it to large-cap from small-cap, while others have established themselves as large-cap from the beginning. But a common factor is that all these companies have remained in the industry for a long time and maintained trackable records. All these companies have
- • Visible competitive edge
- • Strong brand recognition
- • Proven leadership
- • Performance record
Reasons to invest in large-cap:
- • If you have an investment horizon of five years or more and prefer low volatility, then large-cap stocks are a good fit.
- • If volatile growth stocks dominate your investment portfolio, adding a few stable large-cap stocks is smart.
- • Another way to invest in large-cap stocks is through ETFs and mutual funds.
Although these stocks are widely traded and known, you might still have to research them before investing.
Who should invest in large-cap:
You may consider investing in large-cap stocks if you are a first-time investor. These stocks are discoverable, stable, and comparatively low-risk than mid-cap and small-cap shares. If you are a low-risk investor, then large-cap stocks are your best bet to grow your wealth without exponentially increasing risk exposure. If you want to earn a steady income from your investment, buy large-cap stocks that pay regular dividends. Large-cap stocks help investors add stability, diversification, and liquidity to their portfolios.
Advantages and drawbacks of large-cap stocks:
|You can diversify your portfolio across industries.||Although these companies are stable, they take more time to rebound during economic uptrends unlike mid-cap and small-cap businesses.|
|These companies enjoy dominant positions in the market and are usually low in debt.||These stocks are more suitable for short-term investments.|
|They have high liquidity; trade daily on the bourses.||Mid and small-cap stocks generate higher returns against higher risk than large-cap stocks.|
We hope we have answered your question: ‘ what is large-cap?’. During investing, research each stock before adding it to your portfolio and invest according to your goals. For more investment topics, keep following Angel One’s website. Invest in large-cap stocks, open an Angel One Demat account and get the best Demat account charges.
What are large-cap stocks in India?
The first 100 companies ranked as per market capitalisation by the stock exchanges of India are known as large-cap stocks in India. Large-cap stocks have a market cap of more than Rs. 20,000 crore in the Indian stock exchange.
How much should I invest in large-cap stocks?
Your investment in large cap stocks may depend on multiple factors such as income, age, investment goals, and horizons. However, since large cap stocks are stable and relatively less risky compared to small and mid cap companies, they can offer some stability to your portfolio.
Is large-cap more risky?
Large cap funds just like any other equity instrument. They are also susceptible to market irregularities. However, due to a strong business model, a larger market share, and other vital factors, large cap funds are relatively less risky compared to mid and small cap funds.
What is large cap and mid-cap?
Large cap stocks are the first 100 companies ranked as per Indian stock exchanges’ market capitalisation. Large cap stocks have a market cap of over Rs. 20,000 crore. While the mid cap stocks have a market cap of above Rs. 5,000 crore, but less than Rs. 20,000 crore.